India’s foreign exchange reserves fell by $70.1 billion in 2022, data released by the Reserve Bank of India (RBI) shows. The forex reserves stood at $562.9 billion in the week ended December 30.
The decline in the forex reserves is partly due to the RBI intervention in the currency markets to stave off volatility and partly on account of depreciation of other major currencies held by the central bank. The RBI net sold $33.42 billion till September, Union finance minister Nirmala Sitharaman had said in the Lok Sabha earlier. The RBI holds major currencies including pound sterling, yen and euro in its reserves, which are expressed in US dollar terms.
The rupee depreciated 10.2% against the US dollar in calendar year 2022, according to Bloomberg data. The rupee breached 80 against the dollar in September and has remained at Rs 81-82 levels since then.
The rupee is likely to trade with an appreciating bias in the range of 81-83 against the dollar till March, Aditi Gupta, economist at Bank of Baroda
With the US Federal Reserve retaining a hawkish stance on interest rates, the rupee might breach 83 levels, according to analysts. On the trade front, the imports of crude oil and other commodities will continue to put pressure on the rupee. Despite its slide, the rupee has been more resilient compared to its peers in other emerging markets due to RBI
The increase during the week was mainly due to increase in the gold reserves of $354 million, which was offset by decline of $302 million in the foreign currency assets. The RBI held 785.35 metric tonne of gold as of September 30.